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Founder Collective , a newly launched venture capital firm based in Cambridge, has come out of its shell, pegging the close of its first fund at $40 million and announcing its plan to invest exclusively in seed-stage opportunities.
The new firm, launched earlier this year by a trio of technology entrepreneurs, has already invested in 10 companies in 2009 — a pace it plans to maintain, said co-founder and managing partner Eric Paley.
So far, none of the 10 companies is in Massachusetts, but Paley said that is likely to change. “We’ll invest anywhere, but we’re very much focused on Boston and New York,” he said.
Founder Collective first surfaced in June, when the firm filed documents related to its $30 million initial fundraise.
Co-founder Chris Dixon announced the fund’s launch today in a blog post, in which he said the new firm will be modeled after early-stage investors like Betaworks, First Round, Maples, Y Combinator and angel investor Ron Conway’s Baseline Ventures.
“Seed investments are our entire business — they are not options on future financings,” Dixon wrote.
A seed-stage specialist is better for startups than larger funds, which often put in small, seed-stage investments as placeholders, Paley said. When they later decide to walk away, that damages a startup’s ability to raise further funds, he said. “The problem is, they’re signaling value in the market.” While a $500,000 investment may be easy for a large fund to walk away from, for Founder Collective it is much more significant, Paley said.
A small fund also can shoot for smaller exits, Paley added. If an exit under $100 million emerges as the most likely path for a nascent company, Founder Collective won’t pressure the founders to swing for the fences, he said. “We can be far more aligned with the entrepreneur.”
Dixon is a former investor at Bessemer Venture Partners and one of the co-founders at Boston-based SiteAdvisor, which was acquired in 2006 by McAfee Inc. Paley, a former adviser at Flybridge Capital Partners, co-founded Brontes Technology, which sold in 2006 to 3M Corp. for $95 million. A third founding partner, David Frankel, was an investor in Brontes, and founder of Internet Solutions, an Internet service provider in Africa.
Founder Collective’s investments so far are: 20x200, Adsafe, Daily Boost, Datalot, Give, Hot Potato, NPN, Soluto and Voltus.
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